While much has been made over government efforts to dissuade the use of tobacco, several companies in the cigarettes industry have still managed to perform well over the last little while. The industry is currently dealing with a number of newly proposed and/or implemented regulatory changes around the globe, but looks well positioned to continue to grow.

Packaging is one area where governments have been imposing their will of late. Australia now has regulations in place that require all cigarettes to be sold in the same packaging, except for the name and type of cigarette, and also requires that 75% of the front side of packaging be covered with graphic images. How this well affect cigarette sales remains to be seen, but other nations are certainly watching closely. The European Union's Health Commission has declared revisions to its Tobacco Products Directive, which if approved would usher in similar packaging laws. In response, Philip Morris International Inc.'s (1) (NYSE: PM) Vice President, Communications, Julie Soderlund, stated via press release (2) in mid-December 2012:

"PMI is pleased that the Commission has finally issued its proposed Tobacco Products Directive so that it now may be reviewed and debated in an open, transparent, objective and constructive manner by all concerned in the coming months." She said further down the release: "We trust that the hostility of some towards our industry will not blind them to the important economic, legal and societal issues that this proposed Directive raises. We believe that its numerous flaws need to be addressed to ensure that the EU implements a regulatory framework for tobacco products in Europe that is fair, science-based and effective in reducing the harm caused by smoking without imposing unnecessary burden on the economy. Europe deserves nothing less."

Although smoking has declined in a number of countries, companies, like Altria Group Inc. (NYSE: MO), have still managed to turn in solid numbers due to innovative products and the ability to raise prices without significant backlash, among other things. For its most recent quarter, Altria saw revenue growth of 2.2%, and when adjusted to include one-time items, earnings were up 3.2%. Whilst higher cigarette prices on all its cigarette brands helped boost profit, debt-repurchase charge impacted the overall outcome by 44%. Our technical analysis on Altria is available at

The top players in the cigarette industry, Altria Group, Lorillard Inc.(3) (NYSE: LO) and Reynolds American(4) (NYSE: RAI) have been seeing success with smokeless tobacco products. With traditional cigarette volumes on a decline, companies are adapting and trying to stay profitable. In 2012, Lorillard bought Blu e-cigs for $135 million. This acquisition brought in $14 million in revenue for Lorillard in its third quarter earnings report. The value of being proactive in the smokeless products segment has become key for Reynolds American has it tackles with dwindling cigarettes sales.

The industry has also been receiving increased investor attention of late, as many industry players offer high dividends and this is a major long-term argument for investors.